THE HEAD of the world’s largest offshore drilling contractor said today that despite weaker oil and gas drilling activity worldwide, demand for costly deep water drilling rigs remains steady and may possibly even increase in coming years.
Transocean Chief Executive Bob Long said that while the urgency to sign new contracts has declined from recent years when oil prices were higher, the state oil companies of Brazil and India still need deep water rigs.
Long said other companies also continued to show interest but are waiting for business conditions to improve.
He added that as economic pressures force other rig contractors to cancel or delay orders for new rigs, a shortage of the specialised rigs could develop and generate even higher demand for the rigs when oil prices rebound.
Currently however, weak economic conditions, lower commodity prices and reduced spending by oil companies have hurt business worldwide.
The two regions hit hardest are the North Sea and the Gulf of Mexico, where the firm has had to idle several rigs. Only 45 shallow water “jack-up” rigs were working in the Gulf of Mexico last week, although deep water drilling rigs and ships were still virtually all booked in the region.
In recent years, offshore drillers benefited as high oil and gas prices allowed oil companies to boost spending on drilling programs and push into water depths greater than 10,000 feet.
Rental rates for highly-specialized deepwater rigs topped $600,000 per day in some cases and also fueled a building boom for such rigs.
But after crude prices fell from a record $147 per barrel in July to less than $40 this year, new rig orders have dried up and some drillers have been asked to renegotiate contracts.
Transocean said in May they will decide whether to approve a $3 billion stock buyback program. It is also moving forward with a plan to deliver 10 new deepwater drilling rigs by the end of next year.
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